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Russia Expedites Work on Nord Stream 2 Gas Pipeline Before U.S. Tightens Sanctions

2020-12-30 11:13:49
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Russia is stepping up work on the Nord Stream 2 pipeline before the US tightens sanctions on the controversial project to ship more natural gas to Germany.

Construction of the 1,230-kilometer pipeline reached a milestone on Monday with the completion of pipeline laying in Germany's exclusive economic zone, the project operator said. One of the next steps is the resumption of work in the part of the Baltic Sea in Denmark, where most of the remaining parts of the 157 km link will be located.

Progress on the link is a victory for Russian President Vladimir Putin and national gas export champion Gazprom PJSC. When completed, the project will allow Russia to expand gas supplies to Europe and bypass the traditional transport corridor through Ukraine. The US and Eastern European countries say Nord Stream 2 will make Germany and the European Union too dependent on Russian gas.

"There is to be about 120 kilometers in Danish waters and about 30 kilometers in the German EEZ," Nord Stream 2 said in an email answer to questions on Tuesday. “We are unable to provide further construction details. We will inform about further offshore construction activities in due course. "

Work on the 9.5 billion euro ($ 11.6 billion) project was halted a year ago by US sanctions and only resumed earlier this month when Gazprom found its own ship to build the pipeline. Nord Stream 2 will be able to use the vessel Fortuna to carry out the work from January 15, assisted by the construction vessels Murman and Baltiyskiy Issledovatel and other supply ships, the Danish Maritime Authority said last week.

Based on the Danish permit, the operator must submit an updated schedule to the National Energy Agency before the works are carried out. So far, the regulator has not received the updated plan, the agency said. The Fortuna ship can lay no less than 1 kilometer of pipes per day.

At that rate, analysts estimate that in an optimistic scenario, Nord Stream 2 could become operational as early as the end of 2021.

"I am firmly convinced that the pipeline will be completed," Andreas Schierenbeck, Uniper SE's Chief Executive Officer said Wednesday in an interview in the German newspaper Rheinische Post. "People don't have to like the pipeline, but Europe needs it."

The German utility company is one of the main funders behind the project.

The US, meanwhile, is maneuvering to tighten sanctions and extend fines to companies that provide technical certification and insurance for the job. That legislation was part of a broader defense law passed by Congress, but was rejected by President Donald Trump. The House of Representatives voted to lift the veto. If endorsed by the Senate, which is dominated by Trump's Republican Party, the new measures could go into effect in the coming weeks.

Should the senate override Trump's veto on the defense law, "the new sanctions against Nord Stream 2 will become a reality," said Mateusz Kubiak, a senior analyst with Warsaw energy consultant Esperis. "It may just be another factor that will make it more difficult for the Russians to restart the works effectively and in a timely manner," Kubiak said in Danish waters in January.

“All additional pipelaying activities will now be sanctioned, including surveying, trenching and rock placement,” he said.

The US claims that Nord Stream 2 gives Russia too much power over Europe and that the supply of US liquefied natural gas is a better alternative. Nord Stream 2 benefits the economies of Germany and Europe as the price of Russian pipeline gas is 20% lower than that of US LNG, Putin said.

US sanctions could complicate the completion of Nord Stream 2, Kremlin spokesman Dmitry Peskov told reporters last week. Deputy Prime Minister Alexander Novak told state television channel Rossiya 24 on Monday that the pipeline will be completed because it benefits European business.

"It is a commercial project, which is primarily in the interest of our foreign partners," said Novak.

Photo: An employee inspects pipelines at the Nord Stream 2 gas pipeline landing facility on the Baltic Sea coast in Lubmin, Germany, on Wednesday, November 5, 2020. Chancellor Angela Merkel's district on the Baltic coast was the site of the last major Soviet military project in communist East Germany and is now at the center of an ever-widening rift between Cold War allies. Photo credit: Alex Kraus, Bloomberg.

Copyright 2020 Bloomberg.

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